Owning a home is the ultimate dream. People long to have the security of a house on their name and the reassurance that their years of hard work have paid off. To every aspiring homeowner, the most pressing question centers on their readiness to make the dream a reality: how do you know that it’s time to buy a house?
Interestingly, the way to answer this question is to ask yourself a lot more questions. Here are some things to ponder to know if you’re indeed ready.
How’s your financial health?
A house is one of the biggest purchases you’ll make in your life. If you go through this without financial preparedness, you’ll soon find yourself in a money pit. So, get your finances in order. Add up your expenses, including food, transportation, phone, groceries, and debts. Keep track of your monthly income, too.
Once you know how much money is going in and out, you’ll be able to estimate how much you can afford for a home. As a principle, experts recommend that you only spend 28% of your monthly earnings on housing. Apply for a loan and you’ll also get a realistic homebuying budget.
Do you have enough for the down payment?
There’s a good chance you’ve heard of the hard-and-fast rule that you need 20% down payment. Well, that’s not true. In fact, you can buy a home for as little as 3%. But of course, it’s ideal that you put down more cash so that you can enjoy a smaller loan balance and lower mortgage rates in Utah. Experts say you’re essentially making monthly payments more manageable with a larger down payment.
It’s not a secret, though, that it’s difficult to pool funds for such. But, it’s not impossible. One way you can save is to simplify your lifestyle. Perhaps you can reduce the number of times you dine out or tame shopping splurges on clothes. Better yet, sell clothes you don’t wear anymore. Another way to build up your down payment fund is to get a side hustle. Take on an online job, which you can do at the comfort of your home after your 9-5 office job.
Would you drain your savings for closing?
While you’re probably ready for the down payment and monthly dues, you’re not as ready as you think if you don’t have the budget for closing. Remember the “extra” costs you need to settle just before getting the keys to your dream home. These include the lender fees, title fees, and prepaid costs (where you’ll create an escrow account for homeowners insurance and property taxes).
Don’t worry; there are many ways to reduce closing costs. For one, shop around for title and settlement services. These are one of the biggest chunks in the closing budget pie, so you want to get the best deal in the market. Another strategy is to check out your bank’s discounts and rebates programs. Some financial institutions offer mortgage incentives for their clients, so take advantage of that.
It takes an incredible amount of preparedness to live the ultimate dream of buying and owning a home. Take a moment to ask yourself, are you ready to get your own?